INTERNATIONAL BUSINESSS MANAGEMENT – AN ASSESSMENT OF THE ROLE OF MULTINATIONAL CORPORATION IN NIGERIA

INTERNATIONAL BUSINESSS MANAGEMENT – AN ASSESSMENT OF THE ROLE OF MULTINATIONAL CORPORATION IN NIGERIA

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ABSTRACT

Th’e main objective of this study was to look, at international business management and assess the role of Multinational Corporation operating in Nigeria, in terms of their contribution to the socio-economic and technological development of the nation. The study was carried out in some selected multinational and it covered staff (respondent), 120 in number with at least secondary education. Data were collected mainly through structured questionnaires interviews and other secondary sources. The MNC are contributing to the economics and technological development of the nation. The economic contribution is moderate while the technological contribution is in adequate. The MNC are socially responsible that is to say, they are contributing to the social development of Nigeria. But this contribution was found to be inadequate. Finally, the work was concluded with a recommendation on further research and conclusion

CHAPTER ONE

BACKGROUND OF THE STUDY

1.1   INTRODUCTION

National or domestic business not withstanding there is a literally a whole world out there for business to deal with. Just imagine, Coke (Coca-Cola product) is sold all over the world.

American motors is building its jeeps in Japan, Scores of Boeings Jetliners fly for various countries airlines. Peugeot is assembled in Nigeria, you may carry a sony portable radio, drive a Toyota car, wear Italian shoes here in Nigeria and any other part of the world. They are all prove or evidence of international business.

During the past three to four decades, the world has experienced the growth of an economic phenomenon the multinational corporation (MNC). Hicks and Gullet (1981), maintain that MNC are involved in the international business, through one exporting, licensing, franchising, joint venture, foreign branch or wholly owned subsidiaries.

Whole the MNC is not new, its importance, power and consequences have come to be appreciated fully only recently.


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For instances, consider the significant role that large Multinational Oil Companies are playing in the economic systems of the World in General and Nigeria in particular. To press home point, hear what a former Managing Director (MD) of NNPC L.A. Amu, said about Nigeria economy.

“The Nigeria economy can largely be described as one with a strong petroleum industry superimposed over an undeveloped industrial base”. This is a kind of testimony of the positive role of Multinational Oil Company in Nigeria Economy. For without the oil companies, there would not have been an oil or petroleum industry in the initial place.

According to Megginson, et al (1988) “MNC are more than just giant business firms, for they tend to have social, and even political effects as well as economic ones in their host countries”. KINARD (1985) could not agree with this vie, when he said that huge corporations like MNC, play not only economic roles but also important political and social roles in their environments.

For obvious reasons multinational business has its own peculiarities. It involves different countries. Hence, it is


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influenced by different environmental factors in these countries. Therefore international business management or multinational management is equally peculiar and challenging. Multinational managers have to formulate or device separate policies and strategies to survive in the different environment.

Though it is the responsibility of a country government, like that of Nigeria to imitate programmes and actions for her socio-economic growth and development, but governments’ resources more often than not appear inadequate to discharge those obligations effectively.

Megginson et al (1988) maintain the “MNC are more than just giant economic units.

In many cases, they are nearly a form of government, richer and more powerful than some of the countries in which they are operate. For example, in a typical year, the combined sales of Exxon, General Motors and Royal Dutch Shell Group exceeded the GNP of most industrialized nations of the World”. Hence, it is not out of place for society to expect and press these MNC to assume a key role in the socio-economic


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development of their host countries. At least if for nothing else, they should endeavour to live up to their corporate social responsibilities. Meginson et al (1988) puts it this way. “Today’s international business firms are expected to contribute to the host nation’s economic growth and development as well as to produce a profit for the owners’. What they are saving is that MNC should not only be interested in profit maximization in their host countries, rather, they should equally assume other roles that will benefit the society as well.

These societal expectations and demands and other intricate issues in multinational business, as stated earlier, pose great challenges to the management of MNC. For example, any disruption to their operations as a result of crisis between the company and host country/community like the Ogoni-Shell dispute, will be detrimental to especially the interest of the company and to other interest groups.

Therefore, multinational managers have to strike a rather difficult balance between meeting societal expectations and demands as well as other business demands.


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Multinational corporations have been praised by many people are agents of social, economic and technological development of their host countries on the other hand, however, other people feel an regards MNC as instruments of exploitation in their host countries. These two views are based on the extent to which the MNC have met the societal expectations and demand as well as business expectations and demands, in their environment.

There are many of such corporations operating in Nigeria. They are mainly American, European, or Asian corporations, and they are into high technology areas such as agriculture,, construction, mining, manufacturing etc. Some of them are coca-cola, Mobil, Julius Berger. Pfizer, Shell, Glaxo and KLM etc. Expectedly, there are diverse opinions regarding their impact or role in the country. Therefore, this research intends to present a clearer picture of their actual role in Nigeria here for a long time now. This fact not withstanding, Nigeria is still technologically backward.

Secondly, most of these MNC have been reported to recruit home-office personnel (expatriate managers) to fill key


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executive positions instead of Nigeria managers. This does not help the unemployment situation in the country.

Thirdly, it is claimed by some people that the MNC in the country have contributed to the collapse of some domestic companies.

In addition, the host communities of some of the multinationals were constantly cried out that the MNC operating in their area are not socially responsible. The Ogoni-Shell Crisis is a case in point in this regard.

Moreover, it has been observed that these multinationals make the repatriate huge amount of profit always, with little or no reinvestments in the country. Also they appear to be interested only in profit maximization to the detriment of the nation. Base on the above, most people say that MNC are just another form of imperialism exploiting people in under developed nations in general and Nigeria in particular.

On the other hand, however, there are those who believe that MNC are positive forces of social, economic and technological development in their host countries.


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As a result of the above contrasting views. It becomes absolutely necessary to carry out this research to assess the actual roles of the MNC operating in Nigeria.

1.2   OBJECTIVE OF THE STUDY

The board objective of this study is to look at international business management and assess the role of MNC operating in Nigeria.

The specific objectives of this study are:

a)           To ascertain whether the multinational corporation in Nigeria are social responsible.

b)          To ascertain whether the MNC in Nigeria have any contribution to the economic advancement of the nation.

c)           To ascertain whether they contribute to the technological development of Nigeria.

d)          To determine the environmental factors that influences the operations of the MNC

An attempt will be made to collate the activities of these corporations and examine their respective and collective roles in the development of Nigeria.


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1.3   SCOPE OF THE STUDY

For obvious reasons, it will be difficult for a single researcher to study the activities of al the multinationals operating in Nigeria. This research therefore covered the socio-economic and technological contributions of selected multinational operating in Nigeria.

It is the intention of this researcher to arouse the interest of future researchers, students and other interested groups in the areas in question. This is so because; the researcher was not able to give an exhaustive coverage of this interesting and wide topic.

1.4   LIMITATION OF THE STUDY

An exhaustive and more detailed research of this topic would have been carried out but for some obvious constraints of time and finance.

Moreover, some staff of these, MNC were very UNCO-operative in respect of giving out information. Either the information sought is in a file with the inscription “out of


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BOUNDS”. Some either said they were to busy to respond to questions or they were not allowed to.

1.5   RESEARCH QUESTION

The research questions for this research are:

a)           Are MNC in the country socially responsible?

b)          Are MNC contributing to the technological advancement of the nation?

c)           Are they contributing to the manpower development of Nigeria?

d)          Are the MNC in Nigeria most interested in profit maximization?

e)           What impact has the repatriation huge profit to home countries by MNC in Nigeria on the nation’s economy?

)            What effect has the foreign investment of these MNC on

Nigeria’s economy?

g)           What effect has the operation and existence of these corporations on the local business firms?

h)          Are they helping to reduce the unemployment rate in Nigeria?


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1.6   SIGNIFICANCE OF THE STUDY

This study will be a great significance because; it will put improper focus and will create awareness on the real role of MNC in Nigeria. It will show whether they are helpful or harmful to the nation. The findings will be useful to both government and the management of MNC in future development planning. Also it will be beneficial only social researchers, environmentalists, but students in international business management and academicians generally.

1.7   DEFINITION OF THE TERMS

International Business and international business management.

International business according to John et al (1984) refers to economic transactions that involve several countries, while international business management is simply the management of business transaction between citizens, companies, or governments of two or more nations.

Multinational corporations (MNCs) and multinational management. Kinard (1988) defined multinational corporations (MNCs) as business firms that produce and


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market goods and services in more than one country. They include giants such as shell, UTC, Royal Dutch, Coca-cola etc.

According to Hicks and Gullett (1981) multinational management refers to the management of business activities that cross national boundaries. The simple implication of the above definitions to that MNCs are in international business.Aharani (1971) noted that there are some debates as to when an organization can be characterized as a multinational. the fact remains that, the organization will have to be headquartered in one country (mostly developed countries) and have to have business operations spread over other countries. For these corporations, the degree of internationalization and international commitment may cover a wide range.



ABSTRACT

 It has been generally accepted that for any organization to produce and satisfy its stakeholders, such organization must have good management team that manages the resources of the organization using some laid down rules. In manufacturing concerns, inventories constitute a greater proportion of assets. The management of inventories usually involves a lot of problems which range from the right tome to place order to maximization of profits for the stakeholders. Thus, the research undertaken this research work entitled. Evaluation of usefulness of inventory management. A study of some selected Beverage Companies including: Coca-Cola Nigeria Plc, Pepsicola Nigeria Plc and Nigeria Mineral Water Industries Limited.

The objective of this work includes: To determine whether profit is maximized and cost minimized due to the application of the efficient inventory management. To determine also whether manufacturing concerns in our country manage inventories effectively by using inventory management techniques e.g. Economic Lot Size, Just-in-Time etc.

Data were collected using questionnaire method, and were analyzed using chi-square (X2) Pearson product moment, correlation co-efficient (r) and regression analysis.

The result therefore shows that they place order at the right time and right quantity overcoming the setbacks of lead time. The companies also minimize costs of holding inventories and maximize their profits. The findings showed that manufacturing concerns in Nigeria meet the target requirement of their customers, stakeholders, and the society where they operate.

The research recommends that: all staff of the manufacturing concerns should be made to have the thorough knowledge of inventory management as this will enable them to work towards their stock protection and cost minimization. The manufacturing concerns should get the recent developed software on inventory management and use to update their knowledge of inventory management on regular bases.

CHAPTER ONE

1.1       INTRODUCTION

Every Organization has to its own purpose of operation. The level of actualizing the objectives or goals determines how efficient and effective that organization is. But for the goals of any organization to be achieved, such entity must observe some stipulated or laid down principles for its effective performance. When these rules are followed simultaneously, then the usefulness of such principles or concepts will be achieved.

In general term, management has been recognized as that which plans, direct and as well control the effective use of organizational resources to achieve its objective.

Akpala (1987) as in Onuoha (1991:4-5) defines management as the process of combining and utilizing or of allocation of organization’s input (men, materials and money) by planning, organizing, directing and controlling for the purpose of producing output (goods and services) desired by the customers so that the organizational objectives / goals are accomplished.

In evaluating a topic as this, one ma start by analyzing the key words in it, such as usefulness, inventory, and management as they relate to the manufacturing concerns.


Something is said to be useful when it is achieving the best objective, purpose aim or goal of its wage. And also when using the laid down rules and resources available, achieves the best desired goals without wasting the available resources.

According to Ama (2001:470), inventory is the stock o goods a firm is producing for sale and the component that make up the goods.

Again, Hilton (1994:13-14) defines inventory as: an itemized list of goods or valuables with their estimated worth, specifically, the annual accounting stock taken in any business.

Therefore, from the above definitions inventory is the totality of all the stock, which includes: raw materials, work-i-progress and finished goods that enable an organizational to produce. It could also said to be the total amount of goods and or materials contained in a store or factory at any given time.

But the question is: are there ways of handling these inventories for the purpose of achieving the best thereof? The answer is simply yes! The inventories must be managed and controlled in order to achieve their usefulness.

In doing this, the production manager, purchases manager and the sales manager of the organization always put heads together to


design suitable ways of handling the level of stock purchases, production stock requirement and sales using some feedbacks to exercise controls in order to synchronize result with the standard set.

According to Lucey (1989:29), inventory management is the system used in a firm to control the firms’ investment in stock. The system involves recording and monitoring of stock levels, forecasting future demands and deciding when and how to order with overall objective of minimizing in total, the cost associated with stock.

However, inventory management is the ability of an organization to use all the techniques at its disposal to hold the quantity of stock (inventory) that will be enough to produce its required goods needed by the customers at the appropriate time and at least cost to the organization with the view to maximize profit.

Thus, Ama (2001:475) states the following as the usefulness of inventory management to the organization.

-              Reduction in cost incurred due to inventory holding.

-              Maintenance of certain level of customer services that are excellent.


-              Sustenance of a large size of inventory for efficient and smooth production and sale operation.

-              Maximization of profit.

-              Sustenance of minimum investment level in inventories.

-              Avoidance of risk of losses due to theft, frauds, waste or carelessness due to large stock holding.

-              Production of adequate and accurate information regarding inventory to management of effective decision making about the firm.

-              Boost of customers holding.

Organizational resources ate always limited in supply ad the

resources are best utilized when wasteful organizational practice(s) are avoided. It is therefore, the aim of this work to evaluate how beverage companies as part of manufacturing concerns have been avoiding wastages in inventory by using efficient inventory management and control techniques like Economic Order Quantity (EOQ), Just-In-Time (JIT), Quick Response Manufacture (QRM), among others to render efficient services to their customers, maximize their profits, a avoid production hold-ups in factories ad eliminate risk of liquidity crunch, etcetera. To achieve the above


objectives, some beverage companies like Seven Up Bottling Company, Limca Bottling Company (Eastern Bottlers LTD) and Coca-Cola Nigeria Bottling Company were selected for this study.

1.2 STATEMENT OF PROBLEM

The main problem of this research work is that the inventory management techniques that operate efficiently in other countries of t eh world like Britain, Japan, United States of America; among others do not do so in Nigeria local environmental factors through the needs of the models to operated effectively. The specific problems are as follows:

-              Cost of obtaining and holding inventories is always high and this affects the price of the finished products the concerns thereby making it difficult for the common people to get or buy them.

-              That manufacturing concerns due to poor transportation system and unreliable delivery services that hold well in Nigeria find it difficult to determine or forecast workable lead time and inventory levels that can enable them place order at the right time and get replenishments.


-              Due to production hitches suffered by the manufacturing concerns, their customers who are the suppliers to the final customers find it difficult to obtain their required orders especially during festive periods like Christmas and New years, among others, thereby causing scarcity of the products and increase in price.

-              It is difficult in Nigeria for the operators in the manufacturing concerns to determine the quantity of inventory to order which is economical due to variations in environmental factors such

as price changes or products due to constant petroleum price fluctuations that affect other facets of economic production.

The above problems among others have made the researcher to embark on this work to evaluate how efficient the inventory management techniques are operating in the manufacturing concerns in Nigeria.

1.3       OBJECTIVES OF THE STUDY

The general objective of this work is to evaluate the application of inventory management in Nigeria manufacturing concerns, so as to


know whether they operate efficiently like in other countries of the world such as Japan, United States of America and Britain among others.

While the specific objectives are to:

(a)         Determine if manufacturing concerns place orders at the right time and obtain quantities of inventories that are economical through the use of inventory management.

(b)         Determine whether the companies do not have enough inventory size or quantity that help them have hitch-free/smooth production and sales to their customers.

(c)         Ascertain whether the use of inventory management enables the concerns to reduce the cost of inventories ad thereby improve on their liquidity.

(d)         Ascertain whether the companies maximize their profit for the full benefits of their stakeholders.

(e)         Assess if the organizations render efficient services to their customers through prompt delivery of their orders at attractive prices.

1.4    RESEARCH QUESTIONS


For a meaningful research work to be carried out on the usefulness of inventory management in manufacturing concerns, a number of questions must be asked and answered. The following are therefore, some of the research questions:

(i)          Do manufacturing concerns use efficient inventory management techniques such as: economic order quantity (economic lot size) and just-in-time, among others?

(ii)          Does economic lot size technique in particular assist manufacturing concerns to hold sustainable size of inventory, for efficient and smooth production?

(iii)        Has the inventory management and control techniques help them to minimize their costs of inventories?

(iv)        How have the manufacturing concerns contributed to the economic growth of their host communities in particular and the country, Nigeria at large?

(v)         Does efficient inventory management help the manufacturing companies to maximize their profits?

(vi)        To what extent have the customers of manufacturing concerns received satisfactory services from the manufacturing companies?


These question will be structured in such a way that the respondents will state whether they strongly agree, agree or are neutral or disagree in their responses. The answers from these questions will form the basis of the analysis.

1.5 STATEMENT OF HYPOTHESES

A research hypothesis is a generalized and verifiable statement about a state of phenomena which may be true or false.

According to Onu (1996:13), the validity of a hypothetical statement is subject to verification which must be based on adequate information on which decisions could be objectively based for either to accept or reject such a hypothesis. Thus, a research hypothesis is defined further as a rule of accepting or rejecting the validity of a statement on the basis of random samples from the chosen population.

Therefore, these research null hypotheses will be empirically tested in this research work.

1.           Ho: Manufacturing concerns do not minimize costs of inventories through the use of economic lot size (economic order quantities).


2.           Ho: Just-in-Time (JIT), Economic Lot Size and Quick Response Manufacture (tools of inventory management) do not assist manufacture concerns to hold sustainable size of inventories for efficient and smooth production.


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